In high demand

London, June 2 (Reuters): GlaxoSmithKline is to bid more than $15 billion for the consumer healthcare business of US rival Pfizer Inc, people familiar with the situation said on Friday.

The move raises the bar in the auction for the $3.88-billion-a-year over-the-counter (OTC) medicines unit, whose top-selling brands include Listerine mouthwash, Sudafed decongestant and Rolaids antacid.

Previously, analysts had estimated the business would sell for around $14 billion, or 3.6 times 2005 sales, similar to the multiple paid by Reckitt Benckiser for Boots Healthcare International last year. Glaxo lost out in that sale.

Industry sources told Reuters on Thursday that Glaxo, along with Johnson & Johnson and Reckitt, had emerged as frontrunners to acquire the Pfizer business after the chief executive of Colgate-Palmolive played down talk of its interest.

Final bids for the division are due on June 6.

A bid of more than $15 billion from Glaxo, first reported in the Financial Times, would underscore the value that consumer health companies put on a prize asset in a fast-consolidating sector.

If successful, it would secure Glaxo’s position as the world’s leading supplier of non-prescription medicines ? a growth sector being encouraged by many governments who see it as a way to increase patient choice and cut state healthcare bills.

But competition in the auction is expected to be intense.

“I think this is going to be a very competitive sale process. It’s not clear if this will be a knockout bid or not,” said one person close to the matter.

Glaxo chief executive Jean-Pierre Garnier said last month that Europe’s biggest drugmaker was looking at ways to build up its OTC operations but a company spokesman declined to comment on Friday on its specific interest in the Pfizer unit.

Glaxo shares fell 0.7 per cent to ?14.86 by 0900 GMT, among the biggest losers in the FTSE 100 index as investors worried it could overpay. The FTSE 100 was up 0.6 per cent.

Analysts at Dresdner Kleinwort Wasserstein, however, said they believed a deal at $15 billion would be earning neutral in the second year and Paul Diggle of Nomura Code said there may be considerable scope for Glaxo to reduce costs.